Australians drawing on home equity to pay debts
Households are feeling less confident about their ability to manage debt.
ME Bank’s Household Financial Comfort Report has found the proportion of Australian households who fear they won’t be able to manage their debt over the coming 6 to 12 months has doubled since December of last year. 10% of households now express concern about their ability to manage debt, the highest proportion since the survey began in 2011.
Financial stress is also seeing households increasingly draw on the equity in their homes. The proportion of respondents who said they were using their home equity to pay off debt rose four points to 11%, while the proportion who said they did so to make ends meet rose four points to 10%.
“With a lack of cash savings or equity buffer in their home, there’s a marked increase in households expecting to be unable to service their debts, despite record low borrowing costs,” ME consulting economist Jeff Oughton said.
The report also found that 90% of Australian households reported low-to-mid financial comfort, with only 10% reporting high comfort.
“The findings clearly indicate heightened concerns around the adequacy of income, the cost of necessities, lack of job availability and security as well as deterioration in expectations about meeting minimum debt payments and maintaining a standard of living in retirement,” Oughton said.